Warning over sale-and-rent-back vultures

Homeowners who are desperate for cash are continuing to fall victim to unregulated firms offering to buy their property and rent it back to them.

Preying: Sale-and-rent-back firms have been branded 'vultures'

These firms offer to free up money locked in their home and help those in arrears with their mortgage. But instead of providing a quick solution to a cash-flow problem, these schemes can end up with the homeowner on the streets.

Unlike equity release schemes, these firms are unregulated. If your new landlord doesn't keep up mortgage payments, your former home could be repossessed. Short rental agreements also mean there are no guarantees you can remain in your home.

Adam Sampson, of housing charity Shelter, says: 'Some firms will make any promises to convince you to go in for what is plainly a very bad deal. It's daylight robbery.

'These vultures are preying on the elderly in particular.'

Many tenants faced eviction after Dewsbery and Welch, a partnership that traded as Retail and Domestic Properties and Repossessions Stopped, went into receivership in April owing £19m to mortgage lenders on 230 properties.

Among them is Shirley Hale, 72, from Hyde in Cheshire who sold her £85,000 home to Repossessions Stopped last autumn for £60,000.

Mrs Hale ran into debt after a fire at her home and she had to borrow to repair the damage because she was under-insured.

She says Repossessions Stopped had told her she could remain in her 'home for as long as she wanted but she only had a six-month lease.

Her rent was £300 a month. At Christmas she found letters from the lender saying the mortgage wasn't being paid and threatening repossession. She was evicted in June.

She says: 'It was devastating. I lost my home and had to sell my new furniture that I'd gone into debt for at rock-bottom prices. I don't want anybody else to go through the heartache I've gone through. These firms should be stopped.'

Both Shelter, which found her a flat to rent, and the Citizens' Advice Bureau (CAB) are seeing more calls for help from victims.

Moira Haynes, of Citizens' Advice, says: 'They find people on repossession hearing lists at county courts.

They target the vulnerable because they are elderly or when they are panicking about being repossessed and not thinking clearly.

'Lenders are taking repossession action earlier, which feeds in to a climate where these companies flourish.'

These are some of the shocking cases involving other firms which voluntary groups have handled.

The sale-and-rent-back disaster stories

• A couple from Manchester who sold their home to a company after falling into arrears were told to leave a month later despite being originally informed they could stay as long as they wished. Shelter is currently helping them defend a claim for repossession.

• A woman in South London sold her £350,000 home for £200,000 to a sale-and-rent-back firm after being signed off work due to stress. She rented it for £750 a month, but at the end of her six-month assured shorthold tenancy the landlord increased the rent to £1,300 a month. She turned to Citizens' Advice for help.

• A 70-year-old pensioner sold his £100,000 home in the West Midlands in January for £30,000 to a company as he was struggling to repay a loan secured on it and his wife was ill. He was worried he would be evicted. Some months later he was told the landlord's company was in receivership and he and his wife would have to leave. His local CAB is helping them.

The situation is likely to worsen as arrears are expected to rise by 50% next year to 40,000, according to the Council of Mortgage Lenders (CML). The CML, along with Shelter and Citizens' Advice, is calling for regulation.

A spokesman for the CML says: 'There's a clear opportunity for consumer detriment. These firms are being confused with the regulated equity release market.

'They are dealing with people at their most vulnerable point. It's important that the Government acts quickly.'

A Treasury spokesman says: 'The Government is aware of concerns raised about sale and leaseback companies. It is important that anyone considering complex property transactions such as these should seek independent advice before committing themselves.'